Filippo Falorni: Hey, good morning guys. I wanted to ask a question on private label. I know some of your larger categories don’t have a lot of exposure, but maybe you can comment on private label performance in some of the categories that do have the exposure? And then Matt, your point on consumer trade down, kind of starting to cycle that. What are you assuming in your second half guidance, you’re assuming a continuation of the trend, an acceleration of the trend, work straight down; any color will be helpful? Thank you.
Matt Farrell: Yes. Well look there’s a – there’s a half a dozen categories where we have the private label competition and I would say Litter is usually the one we’ve – we’ve talked most about. But that’s been stable. For the last three quarters, it’s around 13% Q4 – Q1 and Q2. As far as trade down goes in household, it’s a consumer is more likely to trade down. Now we’ve talked about trade down within laundry to ARM & HAMMER, we’ve had four quarters of that, as I just mentioned the previous question. We do – based on how July is setting up it looks like that’s continuing to happen. Well, I do expect it’s going to abate a little bit, but one thing that’s notable about trade down is – is which I said in my opening remarks is that Extra, which is a extreme value detergent.
It grew 7.5% consumption in Q2 and it actually gained share. And that was the first time, and that was like 14 quarters that Extra gain share. So that would suggest that there’s a trade down that’s – and Q2, remember this is our most recent quarter, first time that’s happened in 14 quarter. So you’d say, yes, there’s still a tendency to trade down particularly on the household side. When it comes to personal care, particularly health related categories far less likely to see trade down. So I think it’s more of a household story.
Filippo Falorni: Got it. That’s helpful. Thank you guys.
Matt Farrell: Okay.
Operator: Our last question for today comes from Javier Escalante from Evercore ISI. Please go ahead.
Javier Escalante: Hi. Good morning everyone. Another permutation on the spending and reinvestment and what to expect from it in the second half; it feels as if do you guys have built a financial benefit from that spending the higher advertising spending in the second half or not? It’s just basically; you are assuming that you are just rebuilding a baseline of investment?
Matt Farrell: Well, look, some of it is – it’s hard to parse out, well, how much is restoring your typical spend that to maintain brand health and how much is actually going to reduce your top line. As Rick said, I think it’s more likely that it’s going to help THERABREATH and HERO in the second half. The brands that are already doing extremely well, just port some gasoline on those.
Rick Dierker: Yes. And Javier, I would say it also positions us well as we enter 2024. So that should be taken into account as well.
Javier Escalante: And if things continue as well, say, right, that essentially gross margin ahead, top line ahead, that upside, do you rather say close the year with 12% advertising spending or you would rather balance that out and flow some of the upside to the bottom line? Thank you.
Matt Farrell: Yes. Well, I mean, our outlook is what our outlook is. That’s our best forecast of results. So right now, we’re saying we’re extremely happy that we got the 6% EPS growth while bringing marketing back up to 11%, which we thought was going to take two years. We’re doing it all in one year and also making some investments for the future. So not really ready to talk about what we’re going to do if we have upside to that.
Rick Dierker: Yes. But look at – just to pile on gross margin expansion, gross profit growing. These are all great things and volumes inflecting some positive in the second half. There’s a lot of barrels right now for the company.
